www.elsblog.org - Bringing Data and Methods to Our Legal Madness

13 May 2006

Luttig and the Distribution Tail of Lawyer Compensation

Judge Luttig's departure from the Fourth Circuit has renewed debate over judicial compensation. Over at the W$J Law Blog, Peter Lattman cites Chief Justice Robert's 2005 statement that the low pay is a “direct threat to judicial independence" and asks whether federal judges need to make more money. According to Ann Althouse, the clear subtext of Luttig's resignation letter is that "Federal judges are underpaid compared to their alternatives."

What does the data show? I dug into my files to generate this chart, which appears to support the argument of lagging pay. Obviously, there is a growing disparity between judge pay and jobs of comparable prestige in the private sector. (click to enlarge.)

Sources: The American Lawyer, The Lawyer's Alamac

Yet, is corporate CLO and Am Law 50 partner the proper reference group? Granted, Luttig is leaving for Boeing, and Chief Justice Roberts was a partner at Hogan & Hartson (Am Law #21 in 2003) before joining the D.C. Circuit. But over the last twenty years, the earnings of the prototypical median law firm partner (25-29 years out of law school) have not grown nearly as fast. Consider this chart: (click to enlarge.)

In 1985, the salary of a U.S. Circuit Court Judge was $80,400. See Lawyer's Almanac, 759-65 (1986). Inserting this figure into the data for the above chart, the change in earnings index between 1985 and 2003 for a U.S. Circuit Court Judge ($80,400 to $164,000; 100 to 204) is slightly higher than the increase for the median law firm partner in his or her 25 to 29th year ($156,368 to $291,682; 100 to 187). The index for the median entering associate was 201 ($36,000 to $72,500). The CPI changed during the same period from 100 to 171, so the salaries of all three groups increased in real dollars.

So the "problem" of judicial pay really hinges on the reference group. Judges and most law firm partners have beat inflation by a modest amount, but CLO's and Am Law 50 partners have done better. In the second chart, CLO's outpaced law firm partners because the general counsel job has grown more demanding as in-house legal departments have mushroomed in size, essentially competing with law firms for legal work. In the first chart, the pay of Am Law 50 partners has outperformed CLO's because Am Law partners are increasingly handling high-end noncommodity work that is most cost-effectively performed by specialists.

In 1982, Jack Heinz and Edward Laumann noted that "[h]istorically, the
gap between the earnings of the highest and lowest paid practitioners
is larger in the legal profession than in any of the other
professions." Obviously, during the last 24 years, structural changes
in the market for legal services have widened this gap.

Perhaps it is not surprising that federal judges want to be benchmarked against the highest paid practitioners. But an issue that deserves equal attention is the eroding earning power of solo and small firm practitioners, most of whom would be thrilled with the pay, benefits, and security of being a federal judge. For example, in Indiana (Chief Justice Robert's home state) in 2002, 74.9% of lawyers in practice practice made less than $125,000 per year. Arguably, this low level of pay poses a "direct threat to [lawyer] independence" vis-a-vis clients. The Chief Justice might want to address this issue as well in the near future.